When traditional lenders (such as banks or credit unions) deny mortgage financing, it can be easy to feel discouraged. However, it is important to remember that there is always an alternative!

If you’re seeking a mortgage, but your application doesn’t fit into the box of the big traditional institutions, you’ll find yourself in what’s commonly referred to in the industry as the “Alternative-A” or “B” lending space. These lenders come in three classifications:

• Alt A lenders consist of banks, trust companies and monoline lenders. These are large institutional lenders that are regulated both provincially and federally, but have products that may speak to consumers who require broader qualifying criteria to obtain a mortgage.
• MICs (Mortgage Investment Companies) are much like Alt A lender but are organized in accordance with the Income Tax Act with an incorporated lending company consisting of a group of individual shareholder investors that pool money together to lend out on mortgages. These lenders follow individual qualifying lending criteria but tend to operate with an even broader qualifying regime.
• Private Lenders are typically individual investors who lend their own personal funds but can sometimes also be a company formed specifically to lend money for mortgages that carry a higher risk of default relative to a borrower’s situation.  These types of lenders are generally unregulated and tend to cater to those with a higher risk profile.

All classifications noted above price to risk when it comes to a mortgage. The more broad the guidelines are for a particular mortgage contract, the more risk the lender assumes. This in turn will yield a higher cost to the borrower typically in the form of a higher interest rate.

Before considering an alternative mortgage, here are some questions you should ask yourself:

1. What issue is keeping me from qualifying for a traditional “A” mortgage today?
2. How long will it take me to correct this issue and qualify for a traditional lender mortgage?
3. How much do I have to improve my credit situation or score?
4. How much do I currently have available as a down payment?
5. Am I willing to wait until I can qualify for a regular mortgage, or do I want/need to get into a certain home today?
6. Is this mortgage sustainable? Can I afford the larger interest rate?
7. Can I exit this lender down the road in the event the lender does not renew or I cannot afford this alternative option much longer?

If you are someone who is ready to go ahead with an alternative mortgage due to a weakercredit score, or you don’t want to wait until you’re able to qualify with a traditional lender, these are some additional questions to ask when reviewing an alternative mortgage product:

1. How high is the interest rate? What are the fees involved and are these fees paid from the proceeds, added to the balance or paid out of pocket
2. What is the penalty for missed mortgage payments? How are they calculated? What is the cost to get out of the mortgage altogether?
3. Is there a prepayment privilege? For example, are you able to avoid penalties if you give the lender a higher mortgage payment once a month?
4. What is the cost of each monthly mortgage payment?
5. What happens at the end of the term. Is a renewal an option and what are the costs to renew if applicable
6. What is the fine print?

When it comes to the alternative lending space, things can get complex. Contact me today if you’re considering an alternative lender and we can help you source out various mortgage products, as well as review the rates and terms to ensure it is the best fit.

Written by DLC Marketing Team

While not the only factor to look at when choosing a mortgage, interest rates continue to be one of the more prominent decision criteria with any mortgage product. Understanding how mortgage rates are determined and the differences between your typical fixed-rate and variable-rate options can help you make the best decision to suit your needs.

HOW RATES ARE DETERMINED

The  chartered  banks  set  the  prime-lending  rate  (the  rate  they  offer  their best customers). They base their decisions on the Bank of Canada’s overnight rate, because that’s the rate that influences their own borrowing. Approximately  eight  times  per  year,  the  Bank  of  Canada  makes  rate announcements that could affect your mortgage as variable  mortgage  rates  and  lines  of  credit  move  in  conjunction with the prime-lending rate. When it comes to fixed-rate mortgages, banks  use  Government  of  Canada  bonds. In the bond market, interest rates can fluctuate more often and can provide clues on where fixed mortgage rates will go next.

To put it simply: a variable-rate is based off of the current Prime Rate, and can fluctuate depending on the markets. A fixed-rate is typically tied to the world economy where the variable rate is linked to the Canadian economy. When the economy is stable, variable rates will remain low to stimulate buying.

FIXED-RATE VS. VARIABLE-RATE

Fixed-Rate Mortgage

First-time homebuyers and experienced homebuyers typically love the stability of a fixed rate when just entering the mortgage space.

The pros of this type of mortgage are that your payments don’t change throughout the life of the term. However, should the Prime Rate drop, you won’t be able to take advantage of potential interest savings.

Variable-Rate Mortgage

As mentioned, variable-rate mortgages are based on the Prime Rate in Canada. This means that the amount of interest you pay on your mortgage could go up or down, depending on the Prime. When considering a variable-rate mortgage, some individuals will set standard payments (based on the same mortgage at a fixed-rate). This means that, should Prime drop and interest rates lower, they would end up paying more to the principal as opposed to paying interest.

If the rates go up, they simply pay more interest instead of direct to the principal loan.

Other variable-rate mortgage holders will simply allow their payments to drop with Prime Rate decreases, or increase should the rate go up. Depending on your income and financial stability, this could be a great option to take advantage of market fluctuations.

Want to learn more about rates or need mortgage advice? Contact me today!

Written by DLC Marketing Team

When it comes to finding your perfect home, there are so many more options for potential homeowners! From a single-family dwelling to a townhouse to a modular home, the choices are seemingly endless. But, before you start widening your search, let’s take a look at what makes these home types different – and which one is perfect for you!

Single-Family Detached: These homes provide more privacy with less noise from neighbours. They also tend to be larger dwellings (complete with a yard!) which gives you the space and freedom to really make it your own. Due to the popularity of these homes, there is often high demand in them which can drive up selling prices.

Single-Family, Semi-Detached: These homes are suitable for a single family and are typically attached to another house on one side making them more affordable to both buy and maintain. With this affordability does come somewhat less privacy and protection from noise.

Duplex: These are great options for individuals looking to reduce home purchase and carrying costs – live in one unit, rent the second! This type of home also provides unique flexibility for older families, giving you the option to move adult children or aging parents into the second unit.

Townhouse or Row House: These typically have private yards but, in some cases, it may be freehold or condo-style with shared ownership rights and responsibilities. Typically more affordable to buy and maintain, however, they tend to have less privacy and noise protection as well as coming with monthly maintenance or strata fees.

Condominium: These are low- or high-rise buildings containing multiple apartment units. These units are individually owned, with shared ownership rights and responsibilities over the building and the common area. Condos are excellent starter homes for single adults, or couples, as they are affordable and require minimal maintenance. Some buildings even have shared amenities, such as a fitness center or swimming pool or party room.

Modular or Mobile Home: These types of homes are highly affordable and extremely flexible; if you relocate, you can sell the mobile home with the property or keep the home and relocate it! As these are less common and somewhat newer home types, there is less resale demand than other housing types and they are much smaller than a detached or even a condominium. If renting land in a mobile home community, there are also those costs to consider.

Finding the right home to suit your needs means considering your lifestyle and budget now, as well as where you’ll be a few years down the road. Want more information or need help deciding the best option for you? Contact me to learn more about your options when it comes to buying and owning a home.

Written by DLC Marketing Team

It’s not just Ontario: title fraud cases are on the rise in B.C. as well. Daniela DeTommaso, President of FCT, recently sat with Weekend Mornings with Stirling Faux on 980 CKNW to discuss the rising threat.

“[Fraud has become] so sophisticated,” Daniela explains. “If you were to look at some of the [forged] identification that’s being used, an untrained person would never be able to tell the difference.”

Protecting consumers comes down to two things: detection and coverage. “As a title insurance company, not only are we there to protect you […], but our biggest goal is to prevent these things from ever happening,” says Daniela.

When it comes to protecting their property, many homeowners are used to relying on their home insurance. But it can’t protect them from title or mortgage fraud.

what’s the difference between home insurance and title insurance?

Home insurance covers you for things that can happen to/on your property such as:

• Damage to the home or other structures
• fire and flood
• medical liability
• damaged or stolen items

It protects the parts of your property you can touch—structures and items. But that’s only half of the story.

Title insurance protects the part of your property you can’t touch—your right to own it. That right is called your “title,” and if your title is defective, you can’t leverage your home equity or sell the property. There are many risks title insurance can cover, but one of the most damaging is the risk of someone stealing your right to ownership.

TITLE FRAUD

Title fraud is when someone impersonates a property’s owner, then either takes equity out or sells it. If someone registers a fraudulent mortgage on your property, it can cost tens of thousands in legal fees to repair your title, and you can’t sell or leverage your home until you do.

In B.C., if your home is fraudulently sold to an innocent buyer, they get to keep it. Without title insurance, you could lose your home and your equity, with no way to recoup your loss. Title fraud is a real danger, and home insurance can’t protect you from it.

how title insurance protects homeowners and homebuyers

A title insurance policy can cover your losses from losing the insured property, and also carries with it a duty to defend. “We have to pay any legal fees incurred in the course of trying to rectify the problem,” says Daniela. “We are someone to hold your hand through that process, and […] indemnify you against any [covered] loss or damage.”

how do i know if i have title insurance?

Most people with title insurance purchased it during closing. It’s a one-time premium, so there aren’t monthly insurance payments to remind you of your policy. Consult your closing documents and check for an owner’s title insurance policy—you’ll likely see a lender’s title policy, which unfortunately isn’t the same thing.

If you don’t find an owner’s policy, you can reach out to the title insurer who provided your lender policy. They’ll be able to tell you if you have owner’s coverage.

IF I DIDN’T BUY TITLE INSURANCE DURING CLOSING, IS IT TOO LATE?

No, it’s not too late. You can purchase title insurance no matter how long you’ve owned your home. For a one-time premium, you get coverage that protects you for as long as you have an interest in the property. It can also transfer to your spouse or heirs if they take ownership.

Your home is your biggest investment—don’t leave it at risk. Protect yourself now with an existing homeowner’s title insurance policy from FCT.

Insurance by FCT Insurance Company Ltd. Services by First Canadian Title Company Limited. The services company does not provide insurance products. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice.

®Registered Trademark of First American Financial Corporation.

Published by FCT